The Securities and Exchange Commission has dragged AT&T to the court for allegedly sharing non-public information with some selective Wall Street analysts. AT&T is being accused of sharing the information with at least 20 different analyst firms. The information would help these firms lower revenue estimated ahead of earnings. The SEC also alleged in the complaint that AT&T got to know in March 2016 that its revenue would fall short of estimates made by analysts. This was because of the larger than expected dip in the sales of smartphones in the first quarter. The information-sharing helped AT&T beat expectations for the quarter.
In order to avoid it, AT&T Investor Relations executives Kent Evans, Christopher Womack, and Michael Black allegedly disclosed internal sales data to analysts of 20 firms. They also told analysts how it would impact the revenue of the company. The SEC claimed that the data cannot be selectively shared under the Fair Disclosure Regulation (Regulation FD). As per the regulation, a level playing field should be maintained. This can be insured by making the information public when shared with certain analysts and market professionals. After the information was shared, revenue estimates were lowered by analysts. Because of this, the consensus estimate came a little below what AT&T eventually reported.
SEC alleged in the complaint that the CFO of the company told the department of investor relations to ‘work’ analysts. These analysts had ‘too high’ equipment estimates. AT&T has issued a lengthy statement following the complaint. The statement said that the move by SEC is a departure from its own Regulation FD enforcement policy. AT&T also said that the suit is inconsistent with regard to whom all took part in these conversations. It said that the information that was discussed with analysts “was related already widely reported subsidy programs for new smartphone purchases.” AT&T said that taking the matter to the court will in no way protect investors.